The Canadian Dollar (CAD) is picking up a little support amid the broader decline in the USD into the end of the week but gains remain suitably measured, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

CAD gains modestly

“Canada is clearly not off the tariff hook—and next week is likely to see the Bank of Canada cut rates while the Fed sits on its hands, reinforcing punishingly wide yields spreads for the CAD. Oil prices have slipped somewhat, following President Trump’s comments to the Davos/WEF yesterday, and commodity prices more broadly have consolidated over the past week after a solid start to the year.”

“Ordinarily, the improvement in commodity prices/Canadian terms of trade through January so far would be a mild positive for the CAD at least. The USD negative technical signals are starting to mount up. The USD has eased below trend support off the September low this week and continues to carve out what might be a bearish, broadening top on the daily chart.”

“A low weekly close—likely, at this point—puts a bearish outside range reversal on the weekly chart. The CAD has an opportunity to steady or pick up a little ground in the short run. A push under 1.4250 in the next few days could see losses extend towards 1.40/1.41.”